Coherent Corp. (COHR)

From Industrial Laser Maker to AI Datacenter 'Plumbing'

Coherent Corp. (NYSE: COHR) used to be known as a fairly ordinary industrial laser and optics company - components for factories, medical devices, and scientific instruments. But over the past year or so, that story has changed completely. Coherent has repositioned itself as a critical optical-components supplier for AI datacenter infrastructure - in plain terms, the company makes the “plumbing” that moves data at the speed of light between thousands of GPUs inside giant AI server farms.

The turning point: on March 2, 2026, NVIDIA announced a multiyear strategic partnership with Coherent to co-develop optics technology - optical interconnects and co-packaged optics - for next-generation datacenter architecture. More importantly, NVIDIA invested $2 billion directly into Coherent to fund R&D, manufacturing capacity, and US operations. The nonexclusive agreement also includes a multibillion-dollar purchase commitment from NVIDIA plus future capacity access rights.

On top of that, Coherent signed a CHIPS Act letter of intent worth $50 million to expand its 6-inch Indium Phosphide fab in Sherman, Texas - a move to strengthen domestic US manufacturing and reduce geopolitical/tariff risk relative to Asia-based competitors.

The Segment Story: AI Now Drives 75% of Revenue

Per CEO Jim Anderson, datacom/AI-datacenter demand is now the company's primary growth engine. In Q3 FY2026, the Datacenter & Communications segment generated approximately $1.4 billion (up from $1.0 billion a year earlier), while the Industrial segment declined to $444 million (from $529.2 million) - showing that AI-optics growth is genuinely offsetting softness in the legacy business. The datacom/communications segment now represents roughly 75% of total company revenue, a dramatic shift from when industrial/materials was the core of the business.

So the business mix now looks like this: legacy segments (industrial lasers, materials) form a stable but slow-growing base, while AI-datacenter optics is the growth vector re-rating the stock - the primary reason COHR is up +155% over the trailing 52 weeks even after a recent ~29-41% pullback from its high.

⚠️ Shariah Compliance Status: NON-COMPLIANT

Important for you to know: per the Zoya reference (zoya_us_stock_reference), Coherent Corp. (COHR) is classified as NON-COMPLIANT with Shariah screening standards. This is most likely due to the company's interest-bearing debt ratio (long-term debt of roughly $3.1-3.43 billion) exceeding standard Shariah screening thresholds, and/or interest income exceeding the permitted limit. For investors prioritizing a Shariah-compliant portfolio, this stock is NOT suitable for inclusion at this time, regardless of how compelling its AI growth story is.

COHR posted record revenue of $2.05B in Q4 FY2026, up 34% YoY and 13% sequentially. Growth was driven entirely by AI datacenter and communications while industrial was weak.

Q1 FY2027 guidance: revenue $2.2-2.4B, non-GAAP gross margin 39.5-41.5%, non-GAAP EPS $1.85-2.05. Management is aiming for a $3B+ revenue quarter by the end of FY2027.

Coherent pays no dividend and there is no sign one will start soon. Dividend yield is 0%.

Cash and debt capacity are going into capex ($1.10B in FY2026) and deleveraging. With negative FCF, a dividend is unrealistic.